Deutsche Bank’s bold experiment basing front-office staff in Birmingham appears to be paying off. It is to hire additional debt and equities sales executives after seeing revenues from clients serviced from the office more than double.

While other banks have admin, technology and other back-office functions outside London, Deutsche Bank has gone beyond this. Starting last April, it has covered sales and trading clients from Birmingham, with the bank expecting to finish the year with 170 front-office staff in the UK’s second city.

The German bank is now servicing 500 clients that were previously handled by London across debt, listed derivatives and cash equities from Birmingham. Revenues from those clients have increased by around 150%, according to Erik Simonsen, who heads Deutsche Bank’s corporate banking and securities unit in the city.

He said: “The purpose was to try to specifically address smaller accounts that we thought we could probably give better service to from Birmingham by setting up this dedicated team that is thinking about nothing outside of this segment.”

He added: “You can’t have your coverage of a big hedge fund out of Birmingham, but you can have a lot of your coverage for a whole load of other clients out of there. The world is getting much more electronic.”

The accounts handled in Birmingham are typically the smaller accounts that pay Deutsche Bank below a certain threshold in revenues, and those that are more operationally intensive. Low-touch execution is emphasised, with the bank hosting a growing e-commerce team in Birmingham with this in mind.

The bank is set to officially open its new office in Brindleyplace in Birmingham in September, with staff moving over there through the summer months. The bank is set to finish the year with around 170 front-office staff within its investment banking unit in the city, with that number in time set to increase by 100. Simonsen added that the office, which incorporates sales, structuring, corporate finance and debt syndicate, is servicing clients on a pan-European basis, with some clients in Asia also covered from the city.

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Simonsen said: “When people think Birmingham, they think maybe it is a remote floor with 20 sales people in a room. We’re moving into this new trading floor soon with 270 seats on the floor.

“It is basically a mini fully integrated investment bank.”

The front-office staff include those who have chosen to move to Birmingham from London, along with local hires.

The bank’s plans are being closely watched. Philippe Morel, a senior partner at Boston Consulting Group, said: “With front-office costs representing over 40% of total costs, it is logical to aim to reduce this by 10% to 20% with a range of measures, including lower cost locations – ‘nearshoring’ – for coverage and sales teams. This leaves the more expensive, traditional coverage to serve the larger clients.”

Matthieu Lemerle, a partner at McKinsey, added: "As banks look for new ways to adapt their cost-to-serve to the real economic potential of their clients, they will have to accept that not every client can potentially be classed as 'gold', 'platinum' and so on.

"Also, not all clients - or at least not all client flows - are suitable for migration to electronic platforms. This creates an interesting opportunity for cheaper voice coverage in the same time- and 'cultural' zone as the main trading floor."